Making Money from Property – Flipping Houses

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Making Money from Property - Flipping Houses

The term flipping houses are fairly American in its origin, but the concept is nothing new in Britain; for those that don’t know, it simply refers to buying cheap, old and outdated houses and doing them up to sell them for a profit. The flip really comes in with the timeline, the idea being that you ‘flip’ the house as soon as possible to make a profit.

The popularity of house flipping has dropped in recent years thanks to the slow house price inflation, which has meant that to turn a profit, you really do need to renovate instead of just sitting on the property and waiting for it to accumulate more value. Read on to learn more.

Why Do People Flip Houses?

Why Do People Flip Houses

Flipping houses is often seen as a first foray into the property development business. Some people choose to flip houses on the side, in addition to working their nine-to-five, and others decide to make a career out of doing it if they find that they love it or that they have an affinity for it.

It could also perhaps be a one-off project, maybe you have come into some money and want to make a solid return on your investment; flipping a house allows you to do just that.

How Do I Make a Profit?

House prices are not going up as much or as quickly as they used to, which means that you aren’t often able to make money on the house in and of itself without renovating it. In essence, you are going to need to do the house up before selling it if you want to see any real profits. You can also help to maximize profits by buying the property for less than its market value through auctions or buying a property that has been seized or repossessed – although this is obviously not without risk.

You might also be able to get a cheaper property if you discover that the sellers are after a quick sale. Remember that there are also estate agent and legal fees to consider when buying a property. The renovations are also going to cost you money, as will any bills associated with owning the house. Lastly, when you flip a house, you could also be on the hook for capital gains tax which can eat into your profit margin. All of these things need to be considered when flipping a house.

Will I Need a Mortgage?

Will I Need a Mortgage

Whether or not you are going to need a mortgage depends entirely on your financial well-being. If you need a mortgage, you will need to consider your plans. If you are simply flipping the house to sell, but you aren’t planning to ever live there, then you probably won’t be eligible for a residential mortgage because these are designed to be paid back over a longer term. If you are flipping the house to rent out, then you could be eligible for a buy-to-let mortgage.

If you are buying the home to flip quickly and sell on, then your best option is going to be short-term finance of some sort, like a bridging loan or even a buy-to-sell mortgage. The process to obtain these mortgages is quicker, but they usually have higher interest rates, which is something to be aware of.

Regardless, you are still likely to need to put down a deposit – the government’s zero deposit mortgage scheme is not designed for this purpose either. The best thing you can do is speak to a mortgage provider because they can advise you on the best course of action.

What Should I Look for in a Property?

Your choice of property is key because it dictates your profit potential. In today’s financial landscape, your best option is to choose a house that can be dramatically improved to drive up the property’s value. That being said, significant renovations also come with a significant price tag, which is something to consider. Before you commit to a property, you should get a building survey done to assess whether or not the house needs a lot of structural work because that will likely affect your profit margin.

It is also worth conducting a little local research to see what areas near you are seeing the biggest increases in house prices as a whole; up-and-coming neighbourhoods are a great choice. Look at other properties in the area to see what the house could be worth once you have carried out the work. Outpricing an area doesn’t make much sense because the property would be much harder to sell. Lastly, in addition to the cost of properties in the area, you should also check out the local amenities and the crime rate too.

How Do I Get Started with the Renovations?

How Do I Get Started with the Renovations

Obviously, the more money you will spend on refurbishing and renovating the property, the less profit you will make; therefore, you must walk the line between improving the property and overspending. There are a number of refurbishments that you can do fairly cheaply, which would make all the difference. Think about how much you have to spend on the property and where it will be best used.

There is likely to be some work that you can carry out yourself, but, on the whole, it makes more sense to hire professionals. They will be able to get the work done more quickly and advise you on what jobs should take priority. Luckily, you can find all sorts of local tradespeople using MyBuilder, from plasterers to landscapers to painters to carpenters and joiners near you, basically, every tradesperson you would need for the work.

Common Mistakes to Avoid

If you are new to property flipping, then there are a few mistakes that you should be aware of lest you find yourself falling foul of them. Firstly, many newbies accidentally miscalculate their costs, so the endeavour is not as profitable as they think it will be. Once they have a better idea of the costs, their profit is not as big as first thought. Another common mistake is failing to research the area properly; you need to know how likely the home is to sell once you have flipped it.

It is also really easy to underestimate the size and scope of the work. You might have correctly estimated the costs to begin with until you get into the property and start renovating. Lastly, you might also overestimate how much value you are able to add to the property and how much you can sell it for. It is always best to be conservative when estimating the resale value.

In Conclusion

If you can buy and flip a property, then you are in a unique position, and it can be incredibly lucrative too. Of course, this isn’t to say that there aren’t risks; there are, but, for the most part, the property is always a good investment because it retains and appreciates in value. Simply people flip a house and realize the stress just isn’t for them; others give it a go and are totally swept up by the excitement.